Law firms looking to outsiders to fill voids at the top

It used to be a near certainty that the person at the helm of a law firm would be a lifelong partner, but in recent years, several Pennsylvania firms have looked to outsiders to fill leadership voids.

"I think managing law firms is going to become a legitimate career path and as that happens, just like you see CEOs move between companies, I think you'll see people move between law firms," Altman Weil principal Ward Bower said.

Mr. Bower said he has been making this prediction -- and arguing its benefits -- for years without the trend ever taking off. But the time may now be right, he said.

A number of firms have named a relatively recent lateral partner -- the industry term for a partner hired from another firm -- as their next chairman or managing partner, Mr. Bower noted. And there are a lot of 40-to-50-somethings in leadership roles whose natural tenure as leaders of about five to 10 years will be expiring, he said.

When the baby boomer generation of law firm leaders begins to leave, the "heir apparent" might not be there or might not be ready to take over, Mr. Bower said. Those firms might start to look outside, he said.

"I think we will see movement away from the lifer automatically taking that position and it won't just be laterals," he said.

While firms should "absolutely" still be focused on succession planning, Mr. Bower said, one result of that planning could be looking for leadership from outside the organization.

The idea of bringing in an "outsider" for a leadership role in a law firm is far from unheard of. Pepper Hamilton hired Scott Green from WilmerHale, Stevens & Lee hired Temple University Health System Chairman Joseph "Chip" Marshall III as its vice chairman, DLA Piper hired former Linklaters leader Tony Angel as global co-chairman after he spent a few years at Standard & Poor's, and Thomas A. "Tad" Decker joined Cozen O'Connor in 2000 as the firm's managing partner after working in-house for several years.

The only one of those examples to move from one law firm to another was Mr. Green, who is not a lawyer. A law firm partner who possesses a leadership role rarely makes the move to immediately head up another firm.

That was, until Ajay Raju, the former head of Reed Smith's Philadelphia office and former leader of the firm's business department, left to serve as CEO of Dilworth Paxson.

Jessa Baker, a senior consultant with LawVision Group in Chicago, said a rise in external hiring for leadership positions makes sense for some roles and not for others.

Ms. Baker classified leadership positions into two different camps: external and internal. The internal-facing role, which she said is usually given the title of managing partner, is not something firms will be looking to fill from outside the firm.

"The most important attribute to be successful [in the managing partner role] is institutional knowledge and social capital," Ms. Baker said. The managing partner typically oversees issues such as the management of lawyers, supervision of practice group leaders and compensation.

"You can't hire externally for that," Ms. Baker said.

But there are some leadership void needs that could result in a firm hiring its next leader externally.

A firm that is looking to improve profitability may hire away a partner from another firm who has proven successful at alternative fee arrangements or project management. Ms. Baker said firms are already starting to hire pricing directors from other firms.

She said the trend in external hiring thus far has been on hiring nonlawyer business managers.

"The next extension is perhaps to hire a lawyer," she said.

The most likely scenario is for smaller firms to hire from larger firms to get that person's experience, Ms. Baker said. That person is also going to come with a hefty price tag, however, which might knock the smaller firm out of the running.

Gina Passarella: gpassarella@alm.com or 215-557-2494. Read more stories like this at www.thelegalintelligencer.com.

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